Netflix broke down the structure of its ad-supported tier during a virtual presentation today (Oct. 13) and confirmed the offering is coming in early November versus a previously stated window of early 2023. That timing aligns with a busy holiday season where more media budgets are expected to flow to ad-based video on demand and as the company tries to combat cooling subscriber growth.
The plan, called “Basic with Ads,” will be widely available at $6.99 per month starting Nov. 3 in the U.S. as part of a multi-phased rollout spanning 12 markets. It carries most of Netflix’s catalog barring content where the firm is still ironing out licensing agreements and won’t affect existing streaming packages. The price point is cheaper than rival Disney+’s upcoming “basic” tier carrying ads, which costs $7.99 per month.
“We believe, with this launch, we'll be able to provide a plan and a price for every Netflix fan,” said Greg Peters, Netflix’s chief operating officer, on the call.
The streamer also detailed partnerships with DoubleVerify, Integral Ad Science and Nielsen to help brands track the success of their campaigns through metrics like viewability and valid traffic. Nielsen will apply its Digital Ad Ratings, or DAR, in the U.S. sometime next year and eventually integrate the service into its Nielsen One cross-platform solution. The other tools will be accessible to brands sometime in the first quarter of 2023, according to executives.
“This is a chance to reach a diverse, highly engaged audience, including younger viewers who increasingly aren't watching linear TV,” said Jeremi Gorman, president of worldwide advertising at Netflix. Gorman and Peter Naylor were two key ad executives Netflix poached from Snap in August.
“We want our advertisers to know they can reach the right audience, control the type of content their ads appear on and with verification, so advertisers can have confidence in our service,” Gorman added later.
Nearly sold out
Gorman on Thursday said Netflix has “nearly sold out” of ad inventory and attracted hundreds of brands globally across categories including automotive, packaged goods, travel, retail and luxury. Some verticals, like political or policy and smoking-related ads, are barred from the platform.
Peters reiterated that Netflix is maintaining a light ad load of no more than four to five minutes of ads per hour, along with “tight frequency caps.” That could appeal to consumers who have made clear that a heavy commercial play is a turn-off when considering what to watch.
Initially, Netflix is only running 15- and 30-second video ads as pre- and mid-roll units common to digital video sites. Brands will also be able to control for violence, sex and nudity to avoid inappropriate programming.
Two examples of Netflix ads in action were shown on the call, both around the series “Emily in Paris”: A pre-roll for NYX Professional Makeup that includes a YouTube-like ticker showing how much time is left in the ad, and a mid-roll spot for a L’Oreal Paris haircare product.
Ads are available for advertisers at a fixed price versus an auction basis, though Netflix’s broader vision is to create a more innovative model for connected television with the help of ad sales and tech partner Microsoft.
Executives declined to share Netflix’s ad rates, which are reported to be higher than industry peers, and suggested that the relatively barebones features reflect the tier getting up and running in just six months.
“What we do at launch will not be representative of the long-term opportunity of what the product will be,” said Gorman during a Q&A portion of the event with reporters. “We'll be fixed price at first but our roadmap is TBD and we'll continue to innovate and lead in the space.”
Netflix is initially relying on “broad targeting capabilities” based on country, genre and its most popular series and movies to ensure brands can capitalize on “zeitgeist moments” in pop culture, Gorman said. But those who sign up for the ad-supported tier must provide their date of birth and gender, pointing to other targeting possibilities down the road.
“You can see, over time, us moving into things like behavioral ads,” said Gorman. “In the future, we plan to launch the kinds of advertising experiences that our members expect and deserve and the type of experiences advertisers have become accustomed to in this space for many years.”
Additionally, Netflix assured it is keeping its information on subscribers relatively close to the vest amid a period of heightened privacy scrutiny.
“Partners like Microsoft can only use this information in supporting ads on Netflix,” said Gorman. “This will not be used to build profiles for targeting on any other service.”